FORMS OF BUSINESS ORGANIZATION LEGAL STRUCTURES

SOLE PROPRIETORSHIP One Owner ADVANTAGES Low start up costs Receive all profits – Reinvested in Business Freedom of Operation Easily Dissolved Few Regulations – Cottage Industry Personal Taxation not Corp.

SOLE PROPRIETORSHIP DISADVANTAGES Unlimited Liability – Liable for all debts Capital Problems Resources Problems Must Register if you use a name other than yours - renew every 5 years

PARTNERSHIP “ TWO OR MORE” ADVANTAGES Diversification of skills More Available Capital More Available Resources Low Start up Costs

PARTNERSHIP DISADVANTAGES UNLIMITED LIABILITY Divided Authority Hard to find Suitable Partners

GENERAL PARTNERSHIP 2 or more people who share the operation. Profits and Losses, Liabilities shared

LIMITED/SILENT/SECRET Only Liable for the amount that they have invested Must be 1 or more General Partners with Unlimited Liability Silent – no say in operation Secret – name is not openly known – only by the partners. Has a say in the business operations

PARTNERSHIP AGREEMENT Name and Location of Business Purpose of the Business Names of the Partners Responsibilities of each partner Capital Contributions of each Division of Profits and Loss Termination, Death, ETC - Provisions Dissolution of Partnership means

PARTNERSHIP AGREEMENT Should be created before going into operation as there is less chance of argument at this point Must be written and not verbal to be valid and not later disputed. Must be signed by all parties

CORPORATIONS Legal entities existing apart from their owners Public shares – shares traded on the open market Private shares – shares held by a limited number of people not publically traded

ADVANTAGES Limited liability (amount of your shares) Continuous existence (death has no impact) Transfer ownership (sell shares-do no close) Change taxation if profits become to high

DISADVANTAGES Expensive to develop Public scrutiny Government restrictions

FRANCHISING

TERMS FRANCHISE – venture which for a fee licences the right to sell its goods FRANCHISOR – business owner who licences for a fee the right to sell their product of service FRANCHISEE – person who buys the licence which permits them to use the name, product and expertise or the franchisor

FRANCHISE AGREEMENT Used to prevent the franchisee from introducing their own ideas or innovations into a proven format The franchisor must include this in the offering package

TYPES OF FRANCHISES TRADITIONAL – means of distribution of product bottling, automotive, some petroleum BUSINESS FORMAT – franchisor provides all the assistance Full business format

ADVANTAGES Buy an established name Avoid start up costs Best market location and protected area Training, advertising help etc. provided

Often turnkey operations Where the franchisor takes care of all your work except for opening the door each day

DISADVANTAGES Under financed Dishonest Inexperienced Must report regularily to franchisor Must follow the franchise system – thus often slow to respond to local market trends

Pay royalty fees Must contribute to any franchisor plans ie. Advertising – even if you do not agree Often a great deal of work for little profit Not able to introduce your own innovations

Closing note if interest There are 100’s of franchises available every day with different asking packages. Do not rush, investigate until you find one that actually fits your life and desires. It is out there if you look

CO-OPERATIVES

Member owned venture Responsible only to members NOT outside owners or government Each member has a voting rights separate from their investment (1 vote only)

PURPOSE To provide the lowest prices for the members not profit margin

Difference from a corporation Get only 1 vote regardless of your investment Dividends, if any, are distributed based on a persons use of the co-op services.

4 TYPES IN CANADA Consumer/supply – purchase goods for members Service – provide services such as housing Financial – provide financial services Workers – produce commodities – wheat, dairy, auto etc.

ADVANTAGES Less expensive to operate Members have a feel of ownership Goods and services at a reduced rate

DISADVANTAGES SAMES AS A PARTNERSHIP OR CORPORATION DEPENDING ON THE LEGAL FORM CHOSEN